Battle Looms for Cable TV In Loudoun

BySand

ra G. Boodman

December 20, 1982

Northern Virginia aircraft broker S. Ross Lipscomb says he made a smart move by investing $400 in a Storer Broadcasting Co. subsidiary that is competing for the cable television franchise in Loudoun County. If the firm wins, Lipscomb estimates that he could make between $200,000 and $400,000 in 15 years.

"Of course there is a certain amount of risk to this investment," said Lipscomb, one of six influential Loudoun residents trying to help the Miami-based communications conglomerate add Loudoun, one of this area's fastest growing jurisdictions, to the cable systems it operates in communities from Prince George's County to Anaheim, Calif.

In return for risking $400, Lipscomb and the other stockholders of Catoctin Cable Co. -- among them a prominent Leesburg attorney, a restauranteur and a Baptist minister -- own a total of 15 percent of Storer's proposed system for Loudoun, which industry analysts say could be worth approximately $16 million in 15 years. Two years ago, the group helped Storer win a hotly contested battle for the cable franchise in Leesburg, the county seat.

One of the nation's largest cable companies, with assets of $1 billion, Storer is competing against Cable Communications Corp., a newly formed partnership headed by the owner of a local television repair shop and composed of area businessmen and Washington communications lawyers.

Some officials in this predominately rural county predict that Storer will walk away with the franchise when the board of supervisors picks a cable company next March. "A lot of people keep coming up and asking me if we're going to give it to Storer," said supervisor Carl Henrickson, who adds that the board is undecided.

Neverthless, Storer's local representatives are waging an intense lobbying campaign to sell their company to friends and neighbors -- but not to the Board of Supervisors, because county law prohibits lobbying the board.

"We're trying to promote the cause and let people know what cable television can do," said the Rev. Charles Grant of Grace Baptist Church. "I've made contacts with different pastors and church groups and invited them to use the Storer facilities. I could care less whether I own anything. I just want the money to serve our Lord Jesus Christ."

Critics call Grant and Lipscomb "rent-a-citizens" whose presence on the boards of cable companies merely boosts the price subscribers will have to pay for service. In return for helping cable companies win exclusive wiring rights, the local shareholders stand to earn substantial stock payouts for little money. Their presence, some say, means that a company must boost rates commensurate with the amount of stock that the group owns -- 15 percent, in this case--in order to preserve the firm's profit margin.

"If somebody's getting something for free, somebody else has to pay, and it's not going to be the cable operator," said Henry del Castillo, chief economist for the Cable Television Information Center.

"It's customary practice within the industry," said Chauncey Burdan, the cable consultant hired by Loudoun to help pick its franchise. "It's not necessarily going to be passed onto subscribers in Loudoun County, but because Storer has a national base it would be passed on to a variety of subscribers."

Lipscomb acknowledges that he is "politicking" by calling his friends and talking up Storer at parties. But he disagrees that his stock ownership means others must subsidize him, pointing out that he invested $400 of his own money.

"We might be influential, but we're citizens like everyone else," he said. "Whether we make all this money remains to be seen."

Loudoun supervisors say they are less concerned about these local citizens than about awarding the franchise quickly to a responsive firm. "I don't know who these individuals the Catoctin stockholders are," said Thomas Dodson, chairman of the Board of Supervisors, "and it's not a particular concern of mine. I'm more concerned with getting a qualified cable operator into Loudoun as quickly as possible."

But Henrickson, a member of the county's Cable Television Advisory Committee, says that such citizen advocates are "a factor to be weighed in the decision-making process."

"My sense is that the services proposed by both companies are about the same," Henrickson said. "But I think ownership is a very important consideration. As Loudoun County matures, are we going to have to deal with a corporation based in Miami for policy decisions?"

Local ownership is precisely what Cable Communications Corp. of Sterling touts as its chief advantage over Storer.

"It's a pretty exciting, unique opportunity to provide a needed service," said Cable Communications president Raymond J. Hamrick, a United Airlines pilot and the owner of Sterling Electronics, a television repair shop. "We're here and we're responsive, and 60 percent of our company is owned by local businessmen."

His firm's lack of experience in running cable systems is offset, he said, by their business acumen. Hamrick said that his 11 partners, six of whom are lawyers from the Washington firm of Cole, Raywid and Braverman, would put up a total of $500,000 in cash. The remaining $3 million needed to build the system would be financed through industrial revenue bonds or by a bank loan that the partners would seek after the franchise is awarded.

Storer officials stress their firm's superior financial resources and say that they will provide the more than $4 million to build and develop the system. They also point out that, in Leesburg, Storer already is operating a 44-channel system that is schedued to be featured soon in Life Magazine as the nation's only system to have such a large selection of channels in a small community.

"We like to think we're a part of Loudoun County already," said Storer representative Winfield M. Kelly Jr., the former Prince George's County executive. "We're already providing a very, very sophisticated service for Leesburg."

Loudoun officials, who have watched warily the frenzied cable competitions in surrounding jurisdictions, say they were surprised that only two firms bid in Loudoun, the last suburban jurisdiction in the metropolitan area to pick a cable franchise. Had Loudoun not extended its Nov. 1 deadline, Storer would have been the sole bidder.

The limited competition mirrors recent national trends, say industry analysts, who attribute it to economic uncertainties and high interest rates. These factors are compounded in rural Loudoun, which has a low population density and where expensive underground cables must be laid in some areas.

"We didn't come close to applying," said John Lubetkin, a director of Matrix Cable, which lost the fight for the Leesburg franchise two years ago. "Cable is not the goose that laid the golden egg that it was perceived to be several years ago."

Nevertheless, industry analysts say that cable remains a growth industry, and Storer stockholders are confident that their $400 investment was a wise one.

"I think we'd be foolish to sell this stock," said Grant. "I don't intend to, and I certainly think it will be worth something."